The latest news out of the Federal Reserve could spell trouble for most Americans while simultaneously doing nothing to help those who need it most.
Fed Chair Jerome Powell has stated more than once this year that the housing market needs a “reset” though he clarified this more recently to mean a “correction” – what does this mean for us regular Americans?
A lot of people think the unspoken part of this is a drop in house prices and, thus, house values. Does this mean that housing will be available to more people than before? Not necessarily. According to statista.com, about 65% of Americans are homeowners – a number that is slightly higher than it was when home prices and interest rates were low during the 2010s after the big crash. So we actually have more homeowners now that prices are higher. And as far as making homeownership accessible to more Americans, home prices are not even the biggest obstacle for prospective homebuyers; according to credit.org the 4 major obstacles to homeownership include bad credit, debt, lack of down payment funds, in addition to limited budget options (this last one does have a bit to do with home prices, though prices are not the only budgetary factor to consider in homeownership). This same site lists that 83% of millennials (Americans born between 1980 and 2000) with debt find it hard to minimize – a staggering number, especially when you consider that student loan debt is for life and not forgivable through the traditional financial avenues available to those who need to start over (bankruptcy, etc.).
So if high prices aren’t the exclusionary factor that they are being made out to be, does it make sense to pursue a decline in home values? If it does not make housing more affordable for prospective homebuyers AND it risks current homeowners losing equity (and perhaps ending up upside down in their mortgage), does it make sense to pursue this end?
The Federal Reserve, though tasked by Congress to enact policies that promote “maximum employment,” does not have the authority to enact policies that help prospective homebuyers shed debt, build credit, or otherwise leverage their financial situation for a better future for themselves and their families – this is all on our legislators. Looking at the major obstacles to homeownership, it is hard to see how an ends that promotes the disappearance of equity for so many while simultaneously NOT improving conditions for anybody is the proper course of action. There are many factors contributing to the unavailability of homeownership to many, and high values is not necessarily the “boogeyman” that the layman might consider it to be.